Weekly technical analysis on Malaysian stocks

  • Business
  • Saturday, 08 Mar 2003


SHARE prices on the Kuala Lumpur Stock Exchange (KLSE) rebounded from their earlier weaknesses to close slightly higher amid cautious trading on Monday. 

Selective buying interest on blue chips by local funds ahead of public holiday pushed the key market barometer, the Kuala Lumpur Composite Index (CI) marginally higher to close up 2.42 points on that day, thus increasing the odds for more gains on the market in the near term. 

However, global equity market took a turn for the worse, showing fresh nervousness over the US-Iraq issue with oil prices moving higher, while the local bourse was observing the Maal Hijrah holiday on Tuesday. 

In tandem with the weaker regional bourses, especially the Dow Jones at its lowest level in nearly five months, the KLSE was quick to trend lower on its return on Wednesday. 

Trading sentiment was weak. The CI violated its critical support of 645 points shortly after the opening bell on Wednesday and moved downwards as selling pressure intensified before mild covering lifted it slightly off the day’s lows. 

It eased further on Thursday and Friday as Washington ratcheted up on the prospects of war with Iraq. Market movement was lacklustre. 

Trading range for the CI expanded slightly this week, at 15.98-point. It achieved a high of 649.58 on Monday and hit a low of 633.60 yesterday. 

The key index ended yesterday’s trading at 635.66. On a weekly basis, the CI lost a total of 11.4 points, or 1.7 per cent, against 646.80 previously. 

Total turnover for the holiday-shortened week amounted to 543.187 million shares valued at RM1.164 billion against 689.832 million shares worth RM1.365 billion traded the previous week. 

The daily slow-stochastics momentum index and the daily moving average convergence/divergence (MACD) indicator remained weak at the close of trading yesterday. 

Meanwhile, the weekly MACD was flat to lower but still managed to stay above the weekly signal-line in the negative zones. 

At the same time, the 14-day relative strength index and the weekly slow-stochastics momentum index were approaching the oversold territory but they failed to give any indication of a turnaround yet. 

Analysis suggests that the local bourse may subject to further downward pressure next week but it all depend on the developments and outcome in the US-Iraq conflict. 

The CI has cracked below its critical 645 points support level and established a short-term descending channel now. As we had mentioned in our previous market reports, any violation of this important support line may prompt us to review the outlook of our market. 

Now that it has happened, the head-and-shoulders bottom breakout in mid-January that has led us to a bullish stance in the short term has now been reversed. 

The prevailing geopolitical uncertainties remained the chief concern and continued to undermine market sentiment. Investors are still reluctant to commit any fresh position despite the economic data released by the government and the impressive financial results announced so far. 

Therefore, even if the CI were to stage a technical rebound, its immediate upside potential would be checked at the 655 point-channel resistance line. 

Immediate support is seen at 623 and the next downside support would be the 600 points psychological level. 

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